The CFPB sharpens its focus on servicers as student loan repayments return
- While borrowers wrestle with the challenges of meeting their student loan repayment obligations, scrutiny is underway for loan servicers by the CFPB.
- With no formal actions, the CFPB's ongoing research acts as a reminder to student loan servicers, underscoring the importance of compliance with existing laws.
Paying down debt is the top financial resolution of consumers stepping into 2024. However, most people are encountering growing challenges in juggling their overall financial responsibilities.
As the Fall season marked the return of payments on federal student loans after a nearly three-year hiatus, 82% of borrowers are grappling to make ends meet. According to data from the Department of Education, 1 in 4 Gen Z, Millennial, and Bridge Millennial generations are more concerned about student loans than inflation, and around 40% of the 22 million borrowers who had bills due failed to make their payments by mid-November.
While borrowers wrestle with the challenges of meeting their repayment obligations, a parallel scrutiny is underway for loan servicers that have piqued the interest and regulatory attention of the Consumer Financial Protection Bureau (CFPB).
Announced last week, the CFPB has initiated an investigation into potential risks that consumers may encounter in the early phases of student loan repayments. This investigation is mainly prompted in response to a surge in consumer complaints filed with the Department of Education and the CFPB since the resumption of student loan repayments. The examination is also conducted, taking into account the track record and performances of loan servicers in the past.
While the investigation is still in progress, the bureau has identified three key and recurring shortcomings on the part of student loan servicers.
